New Report on Low Income Housing Tax Credits

Legislation | October 09, 2018 | by Linda Couch

A September report from the Government Accountability Office provides a deep look at the Low Income Housing Tax Credit program, particularly total development costs and cost drivers.

For the report, the GAO reviewed 2011 – 2015 data from 1,849 communities from 12 LIHTC allocating agencies (state agencies in AZ, CA, F:, GA, IL, NY, OH, PA, TX, WA and two local allocating agencies: Chicago, New York City). GAO found a median total development cost per unit of $204,000, with outliers ranging from $107,000 per unit in Georgia to as much as $606,000 per unit in California. Generally, GAO found that new construction total development costs are higher than rehabilitation costs per unit.

The GAO found that projects for older adult tenants, which represented a third of all projects, cost about $7,000 less per unit than those for other tenants. GAO hypothesizes that this is because of small unit size in the apartments for older adults.

Lack of consistent data across allocating agencies dogged the GAO’s investigation to some extent. GAO notes in the report that no federal agency monitors or assesses LIHTC development costs, “which are key to evaluating the efficiency and effectiveness of the tax credit program,” the GAO says. State allocating keep inconsistent data on potential cost drivers such as developer characteristics (for profit / nonprofit), tenant type, energy efficiency, payment of prevailing wages, proximity to transit or other amenities, square footage building type, primary construction materials, number of stories per building, syndication expenses, etc.

GAO concludes its report by discussing the important role the LIHTC plays in addressing the housing needs of low income renters, but notes that some LIHTC projects have been scrutinized for high or fraudulent developer cost. GAO’s efforts, it says, have been hampered by shortcomings in program data, which GAO says are the result of lack of standards for collecting and maintaining data on LIHTC project costs.